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Mercadolibre

Nasdaq:MELI
Snowflake Description

Exceptional growth potential with adequate balance sheet.

The Snowflake is generated from 30 checks in 5 different areas, read more below.
MELI
Nasdaq
$14B
Market Cap
  1. Home
  2. US
  3. Software
2017/12/16
Company description

MercadoLibre, Inc. hosts online commerce platforms in Latin America. More info.


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3 Month History
MELI
Industry
5yr Volatility vs Market

Value

 Is Mercadolibre undervalued based on future cash flows and its price relative to the stock market?

Value is all about what a company is worth versus what price it is available for. If you went into a grocery store and all the bananas were on sale at half price, they could be considered undervalued.
INTRINSIC VALUE BASED ON FUTURE CASH FLOWS
Here we compare the current share price of Mercadolibre to its discounted cash flow analysis.value.

The discounted cash flow value is simply looking at what the company is worth today, based on estimates of how much money it is expected to make in the future.

How is this discounted cash flow calculated?

  • The current share price of Mercadolibre is above its future cash flow value.
Often investors are willing to pay a premium for a company that has a high dividend or the potential for future growth.
PRICE RELATIVE TO MARKET
We can also value a company based on what the stock market is willing to pay for it. This is similar to the price of fruit (e.g. Mangoes or Avocados) increasing when they are out of season, or how much your home is worth.

The amount the stock market is willing to pay for Mercadolibre's earnings, growth and assets is considered below, and whether this is a fair price.
Price based on past earnings
Are Mercadolibre's earnings available for a low price, and how does this compare to other companies in the same industry?
  • Mercadolibre is overvalued based on earnings compared to the US Internet industry average.
  • Mercadolibre is overvalued based on earnings compared to the US market.
Price based on expected Growth
Does Mercadolibre's expected growth come at a high price?
  • Mercadolibre is poor value based on expected growth next year.
Price based on value of assets
What value do investors place on Mercadolibre's assets?
  • Mercadolibre is overvalued based on assets compared to the US Internet industry average.
X
Value checks
We assess Mercadolibre's value by looking at:
  1. Is the discounted cash flow value less than 20%, or 40% of the share price? (2 checks) ( Click here or on bar chart for details of DCF calculation. )
  2. Is the PE ratio less than the market average, and/ or less than the Internet industry average (and greater than 0)? (2 checks)
  3. Is the PEG ratio within a reasonable range (0 to 1)? (1 check)
  4. Is the PB ratio less than the Internet industry average (and greater than 0)? (1 check)
  5. Mercadolibre has a total score of 0/6, see the detailed checks below.

    Note: We use GAAP Earnings per Share in all our calculations including PE and PEG Ratio.
    Note 2: PEG ratio is based on analysts EPS growth expectations in 1 year (-8.62%).

    Full details on the Value part of the Simply Wall St company analysis model.
X
Discounted cash flow (2 Stage Free Cash Flow to Equity)

The calculations below outline how an intrinsic value for Mercadolibre is arrived at by discounting future cash flows to their present value. We use analyst's estimates of cash flows going forward 5 years.

See our documentation to learn about this calculation.

5 year cash flow forecast

Present value of next 5 years cash flows:
$973

Terminal Value

Terminal Value = FCF2021 × (1 + g) ÷ (Discount Rate – g)

Terminal Value = $423 × (1 + 2.47%) ÷ (10.08% – 2.47%)

Terminal value based on the Perpetuity Method where growth (g) = 2.47%:
$5,696

Present value of terminal value:
$3,524

Equity Value

Equity Value (Total value) = Present value of next 5 years cash flows + terminal value
$4,497 = $973 + $3,524

Value = Total value / Shares Outstanding ($4,497 / 44)

Discount to Share Price

Value per share:
$101.84

Current discount (share price of $318.91): -213.16%



Estimate of Discount Rate

The discount rate, or required rate of return, is estimated by calculating the Cost of Equity.

Discount rate = Cost of Equity = Risk Free Rate + (Levered Beta * Equity Risk Premium)

Discount rate = 10.08% = 2.47% + (1.011 * 7.53%)



Estimate of Bottom Up Beta

The Levered Beta is the Unlevered Beta adjusted for financial leverage. It is limited to 0.8 to 2.0 (practical range for a stable firm). Note the market value of equity is used not the book value ($14,174,955,417).

Levered Beta = Unlevered beta (1 + (1- tax rate) (Debt/Equity))

1.011 = 0.995 (1 + (1- 35%) (2.36%))

Levered Beta used in calculation = 1.011



Assumptions
  1. The risk free rate of 2.47% is from the 10 year government bond rate in USD.
  2. The bottom-up beta is estimated by analysing other companies in the same industry.
  3. The Equity Risk Premium is calculated by subtracting the risk free rate from the market return premium (7.53%) (source: Buffet).
  4. The dividend discount model is automatically used for companies in the following industries: Banks, Insurance, Real Estate Investment Trusts (REITs), Diversified Financial Services and Capital Markets.

Future Performance

 How is Mercadolibre expected to perform in the next 1 to 3 years based on estimates from 15 analysts?

The future performance of a company is measured in the same way as past performance, by looking at estimated growth and how much profit it is expected to make.

Future estimates come from professional analysts. Just like forecasting the weather, they don’t always get it right!
Annual Growth Rate
36%
Expected annual growth in earnings.
Earnings growth vs Low Risk Savings
Is Mercadolibre expected to grow at an attractive rate?
  • Mercadolibre's earnings growth is expected to exceed the low risk savings rate of 4.5%.
Growth vs Market Checks
  • Mercadolibre's earnings growth is expected to exceed the US market average.
  • Mercadolibre's revenue growth is expected to exceed the US market average.
Annual Growth Rates Comparison
Analysts growth expectations
Super high growth metrics
High Growth Checks
  • Mercadolibre's earnings are expected to grow significantly at over 20% yearly.
  • Mercadolibre's revenue is expected to grow significantly at over 20% yearly.
Past and Future Earnings per Share
The accuracy of the analysts who estimate the future performance data can be gauged below. We look back 3 years and see if they were any good at predicting what actually occurred. We also show the highest and lowest estimates looking forward to see if there is a wide range.
Performance in 3 years
In the same way as past performance we look at the future estimated return (profit) compared to the available funds. We do this looking forward 3 years.
  • Mercadolibre is expected to perform strongly, Return on Equity (ROE) in 3 years is estimated to be above 20%.

Improvement & Relative to industry
  • Performance (ROE) is expected to be above the current US Internet industry average.
  • A decline in Mercadolibre's performance (ROE) is expected over the next 3 years.
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Future performance checks
We assess Mercadolibre's future performance by looking at:
  1. Is the annual earnings growth rate expected to beat the low risk savings rate, plus a premium to keep pace with inflation?
  2. Is the annual earnings growth rate expected to beat the average growth rate in earnings of the US market? (1 check)
  3. Is the annual revenue growth rate expected to beat the average growth rate in revenue of the US market? (1 check)
  4. Is the annual earnings growth rate expected to be above 20%? (1 check)
  5. Is the annual revenue growth rate expected to be above 20%? (1 check)
  6. Is the Return on Equity in 3 years expected to be over 20%? (1 check)
Some of the above checks will fail if the company is expected to be loss making in the relevant year.
Mercadolibre has a total score of 6/6, see the detailed checks below.

Note 1: We use GAAP Net Income Excluding Exceptional Items for our Earnings in all our calculations.

Full details on the Future part of the Simply Wall St company analysis model.

Past Performance

  How has Mercadolibre performed over the past 5 years?

The past performance of a company can be measured by how much growth it has experienced and how much profit it makes relative to the funds and assets it has available.
Past earnings growth
Below we compare Mercadolibre's growth in the last year to its industry (Internet).
Past Earnings growth analysis
We also check if the company has grown in the past 5 years, and whether it has maintained that growth in the year.
  • Mercadolibre's year on year earnings growth rate has been positive on average over the past 5 years.
  • Mercadolibre's 1 year earnings growth is less than its 5 year annual average (7.2% vs 10.3%)
  • Mercadolibre's earnings growth has not matched the US Internet industry average in the past year (7.2% vs 7.4%).
Earnings and Revenue History
Mercadolibre's revenue and profit over the past 5 years is shown below, any years where they have experienced a loss will show up in red.
Performance last year
We want to ensure a company is making the most of what it has available. This is done by comparing the return (profit) to a company's available funds, assets and capital.
  • Strong return on shareholders funds (ROE > 20%) last year.
  • Mercadolibre performed above the US Internet industry average based on Return on Assets (ROA) last year.
  • Performance based on Return on Capital Employed (ROCE) has been diminishing over 3 years.
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Past performance checks
We assess Mercadolibre's performance over the past 5 years by checking for:
  1. Has earnings increased in past 5 years? (1 check)
  2. Has the earnings growth in the last year exceeded that of the Internet industry? (1 check)
  3. Is the recent earnings growth over the last year higher than the average annual growth over the past 5 years? (1 check)
  4. Is the Return on Equity (ROE) higher than 20%? (1 check)
  5. Is the Return on Assets (ROA) above industry average? (1 check)
  6. Has the Return on Capital Employed (ROCE) increased from 3 years ago? (1 check)
The above checks will fail if the company has reported a loss in the most recent earnings report. Some checks require at least 3 or 5 years worth of data.
Mercadolibre has a total score of 3/6, see the detailed checks below.

Note: We use GAAP Net Income excluding extraordinary items in all our calculations.

Full details on the Past part of the Simply Wall St company analysis model.

Health

 How is Mercadolibre's financial health and their level of debt?

A company's financial position is much like your own financial position, it includes everything you own (assets) and owe (liabilities).

The boxes below represent the relative size of what makes up Mercadolibre's finances.

The net worth of a company is the difference between its assets and liabilities.
Net Worth
  • Mercadolibre is able to meet its short term (1 year) commitments with its holdings of cash and other short term assets.
  • Mercadolibre's cash and other short term assets cover its long term commitments.
Balance sheet
This treemap shows a more detailed breakdown of Mercadolibre's finances. If any of them are yellow this indicates they may be out of proportion and red means they relate to one of the checks below.
Assets
Liabilities and shares
The 'shares' portion represents any funds contributed by the owners (shareholders) and any profits.
  • Low level of unsold assets.
  • Total debt is covered by total short term assets, assets are 3.5x debt.
Historical Debt
Nearly all companies have debt. Debt in itself isn’t bad, however if the debt is too high, or the company can’t afford to pay the interest on its debts this may have impacts in the future.

The graphic below shows equity (available funds) and debt, we ideally want to see the red area (debt) decreasing.

If there is any debt we look at the companies capability to repay it, and whether the level has increased over the past 5 years.
  • Mercadolibre's level of debt (82.3% of total debt) compared to net worth is high (greater than 40%).
  • The level of debt compared to net worth has increased over the past 5 years (0.1% vs 82.3% today).
  • Total debt is well covered by annual operating cash flow (85.3%, greater than 20% of total debt).
  • Mercadolibre earns more interest than it pays.
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Financial health checks
We assess Mercadolibre's financial health by checking for:
  1. Are short term assets greater than short term liabilities? (1 check)
  2. Are short term assets greater than long term liabilities? (1 check)
  3. Has the debt to equity ratio increased in the past 5 years? (1 check)
  4. Is the debt to equity ratio over 40%? (1 check)
  5. Is the debt covered by short term assets? (1 check)
  6. Are earnings greater than 5x the interest on debt (if company pays interest at all)? (1 check)
  7. Mercadolibre has a total score of 4/6, see the detailed checks below.


Full details on the Health part of the Simply Wall St company analysis model.

Dividends

 What is Mercadolibre's current dividend yield, its reliability and sustainability?

Dividends are regular cash payments to you from the company, similar to a bank paying you interest on a savings account.
Annual Dividend Income
Dividend payments
0.19%
Current annual income from Mercadolibre dividends. Estimated to be 0.26% next year.
If you bought $2,000 of Mercadolibre shares you are expected to receive $4 in your first year as a dividend.
Dividend Amount
Here we look how much dividend is being paid, if any. Is it above what you can get in a savings account? It is up there with the best dividend paying companies?
  • Paying below low risk savings rate (2.25%).
  • Paying below markets top dividend payers (3.18%).
Upcoming dividend payment

Purchase Mercadolibre on or before the 'Buy Limit' to receive their next dividend payment.

Dividends are usually paid every 3 or 6 months, you can time your share purchase to take advantage of upcoming dividend payments.
Dividend payment calendar
Annualized Historical and Future Dividends
It is important to see if the dividend for a company is stable, and not wildly increasing/decreasing each year. This graph shows you the historical rate to count toward your assessment of the stock.

We also check to see if the dividend has increased in the past 10 years.
  • Not paying a notable dividend.
  • Not paying a notable dividend.
Current Payout to shareholders
What portion of Mercadolibre's earnings are paid to the shareholders as a dividend.
  • Not paying a notable dividend.
Future Payout to shareholders
  • Insufficient estimate data to determine if a dividend will be paid in 3 years.
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Income/ dividend checks
We assess Mercadolibre's dividend by checking for:
  1. Firstly is the company paying a notable dividend (greater than 0.5%) - if not then the rest of the checks are ignored.
  2. Current dividend yield, is there one at all, is it higher than the low risk savings rate, and is it above the top 25% of dividend payers? (2 checks)
  3. Have they paid a dividend for 10 years, and during this period has the dividend been volatile (drop of more than 25%)? (1 check)
  4. If they have paid a dividend for 10 years has it increased in this time? (1 check)
  5. How sustainable is the dividend, can Mercadolibre afford to pay it from its earnings today and in 3 years (Payout ratio less than 90%)? (2 checks)
  6. Mercadolibre has a total score of 0/6, see the detailed checks below.


Full details on the Dividends part of the Simply Wall St company analysis model.

Management

 What is the CEO of Mercadolibre's salary, the management and board of directors tenure and is there insider trading?

Management is one of the most important areas of a company. We look at unreasonable CEO compensation, how long the team and board of directors have been around for and insider trading.
CEO
Marcos Galperín, image provided by Google.
Marcos Galperín
COMPENSATION $8,192,830
AGE 46
TENURE AS CEO 18.2 years
CEO Bio

Mr. Marcos Eduardo Galperín Co-Founded Mercadolibre, Inc. in 1999 and has been its Chairman, President and Chief Executive Officer since October 1999. Mr. Galperín served as Secretary of Mercadolibre, Inc. He worked at YPF S.A., where he was a Futures and Options Associate and managed YPF’s currency and oil derivatives program from 1994 to 1997. He served in the fixed income department of J.P. Morgan Securities Inc. in New York from June 1998 to August 1998. Mr. Galperín has been a Director of Mercadolibre Inc., since October 1999. He has been Director of Grupo Televisa, S.A.B. since April 2017. He has been a Director at Onapsis Inc. since November 2014. He has been an Independent Director of Globant S.A. since July 2014. He served as an Independent Director of Mail.ru Group from October 22, 2010 to October 2013. He served as a Director of TGLT S.A. He is a member of the Management Board of Stanford Graduate School of Business and a Director of the Board of Endeavor Global Inc. Among other distinctions and awards he has been awarded an Endeavor Award, a Konex Prize and has been recognised by Forbes Magazine as a top 10 member of its Forbes 40 under 40 list for the year 2010. Mr. Galperín received an MBA from Stanford University in 1999 and graduated with honors from the Wharton School of the University of Pennsylvania in 1994.

CEO Compensation
  • Marcos's compensation has increased by more than 20% in the past year.
  • Marcos's compensation is higher than average for a company of this size and profit level.
Management Team Tenure

Average tenure and age of the Mercadolibre management team in years:

10.6
Average Tenure
44.8
Average Age
  • The average tenure for the Mercadolibre management team is over 5 years, this suggests they are a seasoned and experienced team.
Management Team

Marcos Galperín

TITLE
Co-Founder
COMPENSATION
$8M
AGE
46
TENURE
18.2 yrs

Pedro Arnt

TITLE
Chief Financial Officer and Executive Vice President
COMPENSATION
$2M
AGE
43
TENURE
6.5 yrs

Stelleo Tolda

TITLE
Chief Operating Officer and Executive Vice President
COMPENSATION
$2M
AGE
49
TENURE
8.7 yrs

Daniel Rabinovich

TITLE
Chief Technology Officer and Executive Vice President
COMPENSATION
$2M
AGE
39
TENURE
6.9 yrs

Osvaldo Giménez

TITLE
Executive Vice President of Payments
COMPENSATION
$2M
AGE
46
TENURE
13.8 yrs

Marcelo Melamud

TITLE
Chief Accounting Officer and Senior Vice President
COMPENSATION
$191K
AGE
46
TENURE
9.3 yrs

Jacobo Imach

TITLE
Vice President
Board of Directors Tenure

Average tenure and age of the Mercadolibre board of directors in years:

8.8
Average Tenure
53.1
Average Age
  • The tenure for the Mercadolibre board of directors is about average.
Board of Directors

Marcos Galperín

TITLE
Co-Founder
COMPENSATION
$8M
AGE
46
TENURE
18.2 yrs

Emiliano Calemzuk

TITLE
Lead Independent Director
COMPENSATION
$173K
AGE
43
TENURE
2.8 yrs

Mario Vázquez

TITLE
Independent Director
COMPENSATION
$175K
AGE
81
TENURE
9.6 yrs

Micky Rais

TITLE
Independent Director
COMPENSATION
$173K
AGE
43
TENURE
4.8 yrs

Mike Spence

TITLE
Independent Director
COMPENSATION
$153K
AGE
73
TENURE
18.9 yrs

Nicolás Galperin

TITLE
Director
AGE
48
TENURE
18.9 yrs

Susan Segal

TITLE
Independent Director
COMPENSATION
$153K
AGE
64
TENURE
5.7 yrs

Javier Olivan

TITLE
Independent Director
COMPENSATION
$153K
AGE
40
TENURE
5 yrs

Roberto Sallouti

TITLE
Independent Director
COMPENSATION
$153K
AGE
45
TENURE
3.2 yrs

Nicolas Aguzin

TITLE
Director
AGE
48
TENURE
0.9 yrs
Recent Insider Trading
  • No 3 month insider trading information.
Who owns this company?
X
Management checks
We assess Mercadolibre's management by checking for:
  1. Is the CEO's compensation unreasonable compared to market cap and profit (greater than 0.5% of the company's profit + 0.03% of market cap)? (1 check)
  2. Has the CEO's compensation increased more than 20% whilst the EPS is down more then 20%? (1 check)
  3. Is the average tenure of the management team less than 2 years? (1 check)
  4. Is the average tenure of the board of directors team less than 3 years? (1 check)
  5. Mercadolibre has a total score of 0/6, this is not included on the snowflake, see the detailed checks below.


Note: We use the top 6 management executives and board members in our calculations.

Note 2: Insider trading include any internal stakeholders and these transactions .

Full details on the Management part of the Simply Wall St company analysis model.

Company News

Company Info

Map
Description

MercadoLibre, Inc. hosts online commerce platforms in Latin America. It offers MercadoLibre Marketplace, an automated online commerce service for businesses and individuals to list items and conduct their sales and purchases online in a fixed-price or auction-based format. The company’s Marketplace platform enables commerce through online classifieds for motor vehicles, vessels, aircraft, services, and real estate; and Internet users to browse through various products that are listed on its Website and to register with MercadoLibre to list and purchase items and services. It also provides MercadoLibre Classifieds service that enables users to list their offerings related to motor vehicles, vessels, aircraft, real estate, and services outside the Marketplace platform; and MercadoPago, an integrated online payments solution to facilitate transactions on and off the MercadoLibre Marketplace by providing a mechanism that allows its users to send and receive payments online. In addition, the company offers MercadoLibre Advertising platform, which enables large retailers and various other consumer brands to promote their products and services on the Internet by providing branding and performance marketing services; and advertisers to place text, display, or banner advertisements in order to promote their brands and offerings on its Webpages and associated sites. Further, it provides MercadoShops, a software-as-a-service, hosted online store solution that enables users to set-up, manage, and promote their own Webstores; and MercadoEnvios, a shipping service for marketplace users. The company was founded in 1999 and is headquartered in Buenos Aires, Argentina.

Details
Name: Mercadolibre, Inc.
Ticker: MELI
Exchange: NasdaqGS
Founded: 1999
Market Cap: $14,174,955,417
Shares outstanding: 44,157,364
Website: http://www.mercadolibre.com
Address: Mercadolibre, Inc.
Arias 3751,
7th Floor,
Buenos Aires,
Capital Federal, C1430CRG,
Argentina
Listings
Exchange Symbol Ticker Symbol Security Exchange Country Currency Listed on
NasdaqGS MELI Common Stock Nasdaq Global Select US USD 10. Aug 2007
DB MLB1 Common Stock Deutsche Boerse AG DE EUR 10. Aug 2007
BMV MELI N Common Stock Bolsa Mexicana de Valores MX MXN 10. Aug 2007
BASE MELI CEDEAR EACH REP 2 ORD NPV Buenos Aires Stock Exchange AR ARS 30. Aug 2013
Number of employees
Current staff
Staff numbers
4,146
Mercadolibre employees.
Industry
Industry: Internet Software and Services
Sector: Software